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Global forecast shows demand soaring in emerging economies - and the US

15 November 2015

A forecast for the world’s construction market over the next 15 years has predicted that China will lose its role as pre-eminent global growth engine to India and the USA, and that the UK will become the largest construction market in Europe, and the sixth largest in the world.

The Global Construction 2030 report, which was written by Global Construction Perspectives and Oxford Economics, and sponsored by the CIOB among others, found that overall, the volume of construction output will grow by $15.5 trillion, or 85% of its present total.

This will be caused by spending on construction services running at an annual average of 3.9%, about 1% above GDP. The US, China and India will contribute 57% of that extra spending.

Jeremy Leonard, the director of industry services at Oxford Economics, said: “The main point is really the gap between the emerging and developed world. It’s been extremely wide in the past 10 to 20 years and it’s a norm that we’ve gotten used to.

“If we look at the present period we can see that that’s narrowed considerably because of a deceleration in the developed markets and an acceleration in the emerging market, so we’re expecting a very different dynamic for growth than we’ve been used to, and it’s not going to go away.”

India and Indonesia

The Indian construction industry is expected to grow at twice the rate of China over the study period as it tries to provide buildings and infrastructure for 165 million new people. Michael Betts, one of the authors of the report from Global Construction Perspectives, said India would need to build 11 million new homes a year, or some 30,000 a day. This would mean that in four or five days India would produce the entire annual output of the UK.

As well as housing, the country must renew its decrepit power infrastructure, construct an all-weather national road system, modernise its rail system and meet an exponential demand for air travel. The report predicts that India’s market, which is presently at $418bn, will reach about $1.5 trillion by 2030

China’s relative decline marks a fundamental change in the state of its economy, from a capital-intensive, infrastructure-led mode to a more “developed” form in which consumer goods and services account for more of the total activity, and the construction sector shifts to health, education and retail.

Indira Gandhi Airport in New Delhi, which is set to be a city of 10 million by 2030 (Source: Wikimedia Commons)

Despite the fall in output growth relative to India, Graham Robinson, the chief executive of Global Perspectives, pointed out that China is still set to increase its overall share of the construction market as “5% growth currently is equivalent to growth of 10% a decade ago, so volumes are increasing substantially”.

Another rising power is Indonesia, which is set to growth from the 11th largest construction market in 2014 to become the fourth biggest in 2030: on the way it will join the US, Brazil, India, Nigeria and Russia in the club of countries that build more than a million houses a year.

Anglo-Americans

In the US, growth will be replicate the north-south split seen in the global picture, with growth concentrated in the southern states, reflecting their higher population growth and infrastructure deficit relative to the rest of the country.  

The need to catch up with long periods of under-investment is also the principal driver behind the UK’s emergence as the premier market for construction services in Europe. The report says Britain needs to spend a total of $6.2 trillion on 3.3 million new homes, a high-speed rail system and new generation of nuclear power stations.

However, it also notes that the UK government is unlikely to be able to finance this work on its own; at present 70% of infrastructure schemes in the country are funded from private sources. The report also notes the possibility of a funding influx from China of the order of $169bn.

Regions that look likely to lose ground in the next 15 years include the Middle East and North Africa, which will have to deal with lower oil prices and continuing regional instability.

Another likely loser is Brazil, which had been expected to become one of the success stories of the 21st century. Leonard said: “In Brazil low oil prices are conspiring with some severe political and structural economic reform difficulties and we frankly don’t see those sorting themselves out over the forecast horizon.”

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